Valor Estratégico Conjunto de los Componentes del Capital

This study described and assessed Uganda‟s trade policy situation at a critical point in time, i.e. just after joining the EAC customs union. It thereby identified a number of issues that need to be addressed in order to make better use of Uganda‟s trade potential. A set of policy reform priorities and technical assistance needs that emerges from the preceding discussion is developed and presented in Table 12.

Table 12: Policy Reform and Technical Assistance Matrix

Policy

issue Action recommended

Requirements

Agency

involved Time frame Implement existing policy Change policy/ legislation Seek technical assistance

Access to regional markets

Establish a time-table for the phase-out of

special tariffs on “sensitive products”. X MTTI Medium term

Ask during the review of the CET for a

reduction in the top rate from 25 to 20 per cent. X MTTI Longer term Push for simple, non-restrictive rules of origin

specifications in regional agreements. X MTTI Longer term

Pursue deeper regional integration through harmonization of trade standards and behind-the-border regulations

X MTTI Longer term

Aim for flexibility within RTAs, including

COMESA, to avoid contradictory requirements. X MTTI Longer term Undertake year-round monitoring of informal

cross-border transactions to improve statistics. X UBOS Medium term

Access to global markets

Use EPA negotiations to obtain more favorable

rules of origin for access to the EU market X MTTI/MoF Medium term Push for reductions in tariff peaks and tariff

escalation in international trade negotiations. X MTTI/MFA Longer term Take proactive stance in Doha Round by

offering own concessions (e.g. extention of tariff bindings and bound tariff cuts) in exchange for substantial reforms of world agricultural trade.

X MTTI/MFA Medium term

Note: Agency abbreviations: MTTI – Ministry of Tourism, Trade and Industry; MoF – Ministry of Finance, Planning and Economic Development; MFA – Ministry of Foreign Affairs; UBOS – Uganda Bureau of Statistics.

Time frame: Short term – within 12 months Medium term – within 2 years Longer term – 2 to 5 years.

Source: World Bank Staff.

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ANNEX: UGANDA AND THE COMESAFREE TRADE AREA

There are opportunities for further integration within the existing COMESA framework.

Uganda is taking part in COMESA‟s tariff reduction program and currently grants an 80 per cent reduction to imports from other members that are at the same stage of intra-regional trade liberalization. In other words, the tariffs it charges on imports from these COMESA countries are only one fifth of rates. Conversely, these other members charge one fifth of their already participating in the COMESA-FTA, such as Rwanda and Sudan, are granting the 80 per cent reductions on their MFN-tariffs to imports from Uganda that the latter is offering them (while allowing free trade with fellow COMESA-FTA members). COMESA members that have moved slower in their intra-regional tariff reduction programs charge higher tariffs (and conversely receive a smaller tariff reduction on their exports to Uganda). For example, Ethiopia applies a 10 per cent reduction in tariffs to its COMESA trading partners, so that Ugandan exporters that want to enter the Ethiopian market pay 90 per cent of the MFN-rates on their shipments. Angola, DR Congo, and Seychelles apply their full MFN duties to Ugandan exports.

Annex Table: Trade Relationships among COMESA Members

Rate of Duty Reduction COMESA country

100%

(COMESA-FTA)

Burundi, Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Zambia, Zimbabwe Secretary General, corresponding consultations on FTA-accession are already under way.¹ FTA membership would simplify trade procedures and lower tariffs with countries like Rwanda and Sudan, and, hence, make it easier for Ugandan exporters to reach regional markets. Some observers claim that exports to Sudan could double if free trade were instituted.² But the GOU has indicated that it needed more time to study the effects of a complete elimination of tariffs. It has also requested that a compensatory mechanism for losses of tariff revenue be established and that safeguard measures to soften the impact of potential import surges be implemented.

Yet, given that official imports from COMESA-FTA members other than Kenya, with which Uganda is already in the process of practicing free trade under EAC provisions, account for less than 1 per cent of Uganda‟s total imports and that these imports already occur at reduced tariff rates, the prospective impacts of joining the COMESA-FTA on tariff revenues and the

1 “More COMESA countries urged to join Free Trade Area,” Xinhua, 6 December 2005.

2 “Sudan: Uganda losing out to FTA countries,” The East African, 7 February 2006.

economy at large seem rather limited. Moreover, two COMESA-FTA members, notably Burundi and Rwanda, are expected to accede to the EAC during 2006, even though the exact timetable and procedures, including possible transitional arrangements, remain to be determined.³ The rationale for Uganda to stay outside the COMESA-FTA is further weakened under these circumstances and the GOU should consider to advance its integration with COMESA and join the FTA in order to maximize the benefits from regional trade.

3 “Rwanda, Burundi join EAC in March,” The New Times, 10 February 2006.